Lawmakers take steps to clean up state's messes

Lawmakers take steps to clean up state's messes

EB-5 Visa, EB5 Visa, EB-5 Investment

The governor, a group of Republicans and a group of Democrats separately filed new legislation dealing with ethics, contracts and conflicts of interest last week.

The various measures, along with several others introduced earlier in the 2016 session, are responses to two scandals that unfolded over the past three years and raised questions about possible corruption in government and programs.

One involved the federal EB-5 immigrant-investment program that came under scrutiny after the shotgun suicide death of a former state official in 2013.

The other involved management by the Mid-Central Education Cooperative of the state’s GEAR UP program that helps Native American students and their families consider further education after high school.

Scott Westerhuis, the business manager at the cooperative, reportedly shot to death his wife, their four children and then himself at their home outside Platte last year. The house burned to the ground with their bodies still in it.

Various improprieties involving state, federal and other funds have come to light as a result.

The state auditor general has been conducting a deep investigation into how the GEAR UP money has been spent by Mid Central and its various contractors. Here is a look at proposed legislation that has resulted:

GEAR UP scholarships

A coalition of lawmakers from both parties led by Democratic Rep. Julie Bartling of Gregory is now taking aim at a specific shortcoming found in the GEAR UP program’s operation.

Their measure, House Bill 1220, calls for the state Department of Education to redirect 50 to 75 percent of the federal GEAR UP funding toward scholarships. The grant agreement currently contains a waiver allowing the money to be used for purposes other than scholarships.

State Education Secretary Melody Schopp terminated her department’s GEAR UP contract with Mid-Central in September. Within hours, the Westerhuis family was dead. The state Board of Regents, which governs the state university system, subsequently accepted responsibility for managing GEAR UP.

South Dakota receives $3.4 million annually from the federal Department of Education for the program that helps Native American children across the state, including a significant number in the West River region.

More internal controls

Gov. Dennis Daugaard assigned Lt. Gov. Matt Michels to look at state government’s controls regarding pass-through grants such as GEAR UP. The result of Michels’ work is Senate Bill 162 that proposes a state Board of Internal Control.

It calls for seven members headed by the commissioner of finance and management to develop financial control guidelines, a code of conduct and a conflict of interest policy to be used by state agencies.

Each state agency would establish an internal control officer. The new board would receive copies of all audits and related correspondence from the state auditor general involving federal funding.

All grants, pass-through grants and any other money awarded by a state agency starting July 1, 2016, would be posted on the state government website. The grant agreements would include sworn statements by recipients or sub-recipients that a conflict of interest policy and internal controls are in place and followed.

Nonprofits also would have to post their IRS 990 filings for public viewing.

State employees suspicious of activities involving grants would be required to report to their immediate supervisor, the state attorney general or the auditor general. There would be protection against retaliation for reporting violations of state law.

Outing self interests

Rep. Paula Hawks, D-Hartford, has proposed restrictions against self-dealing by state board members in House Bill 1155 and proposes creation of a 12-member politically balanced South Dakota Government Accountability Committee to handle ethics complaints in House Bill 1227.

Her two bills have only Democrats on their sponsor lists. The Legislature has large, controlling Republican majorities in the House of Representatives and the Senate.

Listing contract recipients

Sen. Scott Parsley, D-Madison, heads a bipartisan coalition that wants the names and contracts of state contract recipients to be posted on the state website if the cumulative total of the amounts exceeds $50,000.

State law requires public posting of contracts if they are above $50,000.

Parsley’s bill is Senate Bill 163. Hawks is his lead sponsor in the House. She is the only Democrat running for the U.S. House seat held by Republican U.S. Rep. Kristi Noem, who is seeking re-election this year.

Allowing officials leeway

Rep. G. Mark Mickelson, R-Sioux Falls, introduced a measure Thursday that would allow a public official at the local level or an appointed member of a state board, commission or authority to have an interest in a contract under certain circumstances.

The person would need to have provided written notice in advance to the agency’s top person of the interest in the contract and receive written clearance.

The authorizations would be public records to be kept by the auditor general and reviewed annually by the Legislature’s Government Operations and Audit Committee.

The legislation lists 21 state boards, commissions and panels that would be specifically covered. Republicans are the only legislators on the sponsor list for HB 1214. Mickelson is expected to be a candidate for the Republican nomination for governor in 2018.

A few other measures

The House approved House Bill 1090 Thursday that requires local government insurance pools to receive annual audits and to file the audits with the state auditor general.

Sen. Mike Vehle, R-Mitchell, introduced Senate Bill 143 that would assign the Legislative Planning Committee with the duty of reviewing each state department and agency at least once every three years and reporting publicly on the progress toward achieving up to six performance measures.

All of the proposals came at the deadline for individual legislators to introduce legislation.


  • South Dakota

Securities Disclaimer

This website is for informational purposes only and does not constitute an offer or solicitation to sell shares or securities. Any such offer or solicitation will be made only by means of an investment's confidential Offering Memorandum and in accordance with the terms of all applicable securities and other laws. This website does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or any invitation to offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. LLC and its affiliates expressly disclaim any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) reliance on any information contained in the website, (ii) any error, omission or inaccuracy in any such information or (iii) any action resulting therefrom.